THE FEDERAL RESERVE PAUSES INTEREST RATES BETWEEN 5% AND 5.25%
July 6, 2023
In a unanimous decision Wednesday, June 14, Federal Reserve Officials agreed to hold the benchmark federal-funds rate steady at a range between 5% and 5.25% after a streak of 10 consecutive increases in the fastest rate rise since the 1980’s. Last week’s economic projections strongly indicated that officials are leaning toward reducing interest rate hikes rather than halting them altogether. They are now cautious about raising interest rates with concerns of a delayed effect from their previous rapid rate increases from last year and the recent strains in the banking system. As a result, they are currently trying to strike a balance between high inflation and increasing interest rates with the possibility that there will be a sharper economic slowdown in the coming year.
While the decision has been made to pause interest rates for the moment, Federal Reserve Chair Jerome Powell hinted that his default position for now is to raise rates at the Fed’s July 25-26 meeting. Powell has said that he favors spacing out the Fed’s rate increases given how close they were to their final destination for rates. While 12 of the 18 Federal Reserve Officials still believe they will need to increase rates to a range between 5.5% and 5.75%. This would require two additional quarter-point increases at any of the four meetings this year, lifting rates to their highest point in 22 years.